LONDON/SYDNEY, July 31 (Reuters) – Commercial real estate investors and lenders are slowly confronting an ugly question – if people never again shop in malls or work in offices the way they did before the pandemic, how safe are the fortunes they piled into bricks and mortar?
Rising interest rates, stubborn inflation and squally economic conditions are familiar foes to seasoned commercial property buyers, who typically ride out storms waiting for rental demand to rally and the cost of borrowing to fall.
Cyclical downturns rarely prompt fire sales, so long as lenders are confident the investor can repay their loan and the value of the asset remains above the debt lent against it.
This time though, analysts, academics and investors interviewed by Reuters warn things could be different.
With remote working now routine for many office-based firms and consumers habitually shopping online, cities like London, Los Angeles and New York
Commercial real estate loans represent the second-largest lending exposure of Canada’s six largest banks
Canada’s banks may not be as exposed to commercial real estate as their counterparts in the United States, but that doesn’t mean their earnings aren’t at risk, particularly from the office segment pummelled by remote work, according to a prominent Bay Street analyst.
